The Supreme Court’s decision in State Bank of India & Ors vs. Consortium of Murari Lal Jalan and Florian Fritsch & Anr addresses key aspects of corporate resolution under the Insolvency and Bankruptcy Code, 2016 (IBC). It focuses on the legality of adjusting a Performance Bank Guarantee (PBG) towards a tranche payment, requirements for effective date fulfillment, conditions precedent, and consequences of non-compliance. The judgment reiterates that Resolution Plans must strictly adhere to IBC provisions and judicial orders to protect stakeholder interests and ensure fair insolvency practices.

A. Factual Background:

• Corporate Insolvency Proceedings Initiation: (Para 2) Jet Airways went into insolvency in 2019, with SBI initiating the Corporate Insolvency Resolution Process (CIRP) under Section 7 of IBC due to unpaid debts exceeding Rs. 7,800 crores.
• Resolution Plan Approval: (Para 5) The consortium led by Murari Lal Jalan and Florian Fritsch submitted a Resolution Plan approved by NCLT in 2021, involving an infusion of funds and debt settlement.

B. Legal Contentions and Issues Raised by Appellants:

• Issue on Adjustment of PBG: (Para 7) The core issue concerned the adjustment of Rs. 150 crore PBG towards the first tranche payment due under the Resolution Plan, which was opposed by SBI based on the IBC and prior court directions.
• Non-fulfillment of Conditions Precedent: (Para 8) SBI claimed the Consortium failed to fulfill conditions, like airport dues and workmen's dues, jeopardizing the plan’s effectiveness.

C. NCLT and NCLAT Orders:

• NCLT Approval and Extensions: (Para 6-13) NCLT granted multiple extensions to meet the Conditions Precedent, considering delays attributed to regulatory and operational challenges faced by the Consortium.
• NCLAT’s Endorsement and Further Directions: (Para 24) NCLAT upheld NCLT's orders but set further deadlines for compliance, including adjusting the PBG as part of the tranche payment.

D. Supreme Court’s Determination:

• Analysis on PBG Adjustments: (Para 22) The Court concluded that adjusting the PBG against the tranche payment was impermissible, affirming that tranche payments must be direct cash infusions.
• Compliance with Resolution Terms and Liquidation Consequences: (Para 23-24) The Court mandated strict adherence to the plan's payment schedules, underscoring that failure to meet these could lead to liquidation under Section 33(3) of the IBC.

Ratio Decidendi (Legal Principle Established):

The Supreme Court held that Performance Bank Guarantees (PBGs) cannot be adjusted against payments due under a Resolution Plan unless explicitly provided. The judgment emphasizes the inviolability of IBC’s structured payment obligations and affirms that non-compliance with approved plans warrants liquidation to uphold creditor rights.

Acts and Sections Discussed:

• Insolvency and Bankruptcy Code, 2016
  • Section 7: Application for initiation of CIRP by financial creditors.
  • Section 30(2)(e): Conditions for approval of Resolution Plans.
  • Section 33(3): Liquidation following failure to implement an approved Resolution Plan.